Short Report: Bears boost exposure to Rocket Companies despite dovish Fed tilt

Welcome to this week’s installment of “The Short Interest Report” – The Fly’s weekly recap of short interest trends among some of the most widely followed high-short-float stocks. Using the data from our partner Ortex.com, which utilizes the latest information from stock lenders to estimate short interest changes for thousands of publicly traded companies, this report will screen for some of biggest changes in short interest as a percentage of free float and days-to-cover ratios while also considering the short interest data on some of the more volatile and heavier-traded names of the week. Based on the availability of data from Ortex, the report tracks the trading period that covers prior Friday through Thursday of this week, excluding holidays. As a basis of comparison for stocks discussed below, the S&P 500 index was up 0.6%, the Nasdaq Composite was up 1.4%, the Russell 2000 index up 0.8%, the Russell 2000 Growth ETF (IWO) was up 0.8%, and the Russell 2000 Value ETF (IWN) was up 0.9% in the five-day trading session range through Thursday, December 21.

SHORT INTEREST GAINERS

• A more dovish Fed tilt perceived by the markets following the December 13th FOMC decision served up a fuel injection to shares of Rocket Companies (blue‘>RKT), with the stock gaining nearly 40% since that meeting, though bears are hardly spooked and not prepared to bet on a mortgage and consumer lending bonanza quite yet. Shorts as a percentage of free float for Rocket Companies was up from 20.3% to 21.7% this week, the highest level in about four months, while days to cover rose from 6.4 to 7.2 despite the pickup in volumes. The stock was also up 11.4% in the five-day period through Thursday, though Friday’s benign PCE inflation print – an event that seemingly should have put another notch in the belt of the Fed’s inflation campaign – has not produced more strength in the shares.
• Birkenstock (BIRK) remains on our radar this week as bears continue to doubt the gains the stock has made against the more cautious consumer environment since its October IPO. Shorts as a percentage of free float rose from 28.4% to 31.4% this week, marching steadily to its record high of 34% in the first week of trading, while days-to-cover on the name rose another 100 basis points to 6.5 – a record high coming in spite of the pickup in trading volumes. The company has been favorably viewed by a number of sell-side firms heading into the year-end, earning price target boosts from JPMorgan and Stifel on top of the Top Pick designation from Telsey Advisory, but heeding this week’s disappointing top-line from Nike (NKE) warrants caution in the Footwear space. Shares of Birkenstock were down 6.3% in the five-day period covered through Thursday.
• Estimated short interest on Viridian Therapeutics (VRDN) was dialed down from about 20% to around 18% earlier in the week as the company announced “positive” set of clinical data and the selection of VRDN-003 as its lead subcutaneous program for thyroid eye disease – TED – based on positive results from a Phase 1 study on Monday, which had sent the stock up nearly 10%. Short positioning has normalized since then however, rising back to about 20.5% – a level observed over this month’s first week. Days to cover also turned higher over the past couple of sessions, rising about 130basis points to as trading volumes compressed. In the five-day period covered, Viridian ended up gaining 10.5%.

SHORT INTEREST DECLINERS

• Ortex-reported short interest in Bluebird Bio (BLUE) collapsed from 25.5% to 15.7%, though with the stock shedding 58% of its value this week to $1.37 in the wake of a priced $125M stock offering at $1.50, it is understandable that so many bears are moving on with profit-taking into the year-end. As discussed in the BofA research note on Thursday, while the company’s equity raise extends Bluebird’s runway to 2025 from prior assumption of Q2 of next year, its fortunes now rest solely on the SCD-targeting launch of Lyfgenia – a drug dented by the recent black box warning.
• Estimated short interest in Lucid Group (LCID) has also come in noticeably this week with a slide from 28.6% to just under 25% – the first time below that level since October 11th, according to Ortex data. Investors were already unenthused by the company’s reported Q3 results in early November that were indicative of tepid demand, and this month’s departure of Lucid CFO and a cautious note out of Stifel questioning its high-cost economics overshadowed the brief macro “sugar high” of a more dovish Fed. The stock fell about 16% in the five-day period, though the bears are now taking a wait-and-see stance with profit-taking.